With so many exchange traded funds (ETFs) in the pipeline, the question has been raised, who gets approved first and why?  We turned to an attorney, John McGuire with Morgan, Lewis & Bockius, who gave his outlook on the process.  While this may not necessarily be how it is done at the Securities and Exchange Commission (SEC), they approve the ETFs, it does give an idea of the process.

McGuire says there are a number of factors that play into the approval process, most importantly, when the application is filed.  It seems FIFO (first in first out) plays a role here.  However, "novel" applications, such as active management or new asset classes, take longer to approve.  Those ETFs that track someone else’s already approved application take less time.  Quality is also an important aspect.  If the application is prepared properly, complete and with little misunderstanding, this can be a big help.

Other factors that come into play include the applicant’s response time to SEC comments on the application.  If the applicant is slow to respond or wants to argue about the comments, rather than make the suggested changes, this will obviously slow down the process.  Knowing how to apply some pressure may help let them know of the "keen interest" to get the ETF approved.  But this is tricky, because one could become obnoxious.